Monday, August 2, 2021 07:10

Insurance Agent – Video3

Q. Home insurance is often described as a package policy. Can you explain some of the things that are included in this package and some things that a home owner might want to consider.

A. All companies will have their own packages of basic coverage within their policy. You need to spend time up front before you purchase the policy to understand what each of these packages will include and more importantly what they don’t include. Generally the more coverages and protections within the policy, the more expensive it is. Unfortunately a lot of people won’t understand if they are covered for certain items until the time of claim and that’s not the time to know whether you are covered or not.
Generally there are three main areas of coverage that all packages will protect you for.

Q. You mentioned three areas of protection. Can you talk a bit about the first area?

A. The first area is often called coverage A, and that’s mainly protection of the building and the structure of the building and anything that’s permanently attached to the home. Items like kitchen cabinets and anything that may be permanently installed like dishwashers. That’s the starting point for the policy and your insurance company will calculated what the maximum risk to them is if your home should burn to the ground and be completely gone. Basically it is what it’s going to cost them to rebuild that home and this may or may not be similar to your purchase price or the market value from the perspective that not only rebuilding the house but possibly redoing the foundation and any environmental cleanup is all included in this coverage A number. So when your insurance company starts they are going to calculate that number and that will drive a lot of other numbers in your policy. One of the important things to know about coverage A for the replacement of that structure is that you want to make sure that you have a policy that has similar construction to it. Meaning that when the rebuild that structure it’s going to have similar materials they use solid wood doors, wide baseboards, upgraded carpets.  Some policies on the market are common constructions meaning they are going to build it to builder’s grade and they have fulfilled their contract and obviously you are not happy because you don’t have the same house that you lost prior to the event. Coverage A is extremely important how you understand how it was calculated and make sure that it appears to be an accurate number.

Q. We have covered the first area of protection on Home Insurance Policies, what would the second area be?

A. The second area is often called coverage B, and it usually protects your personal property. Often with a package of insurance your company will give you a percentage of your coverage A which is included at no charge so you might be covered for $300,000 to $400,000 of personal property. Your personal property is everything that you are going to move in to that home and if you ever move out everything that you are going to take with you.
When they come up with cover B you’ll want to make sure that it is enough coverage to protect your personal property and you’ll want to make sure you have full replacement value on that. Some companies will give actual cash value meaning at time of claim they are going to discount the value of your goods by their age.  Your other option is a replacement value meaning that you are going to go out and buy a replacement TV similar to what you had before and they’re going to reimburse you for that.
Coverage B is very important and it’s very important that you understand all the different clauses and options in this area because there may be special limits for things like cash and jewellery. Make sure you take some time talking about your coverage B and how your personal property is being protected

Q. We covered the first two areas of protection can you explain the third area?

A. Sure, the third area of protection that’s covered in most home owner policies is protection from liability. Basically that’s protection against a lawsuit that’s brought against you. If you injure a person or if someone is injured on your premise or you do damage to their property they’re going to sue you and this is covered under your liability protection.  This pays for lawyers to be hired to defend you in court and will pay up to those limits on any judgment that is brought against you. Generally people are looking for higher limits of liability protection today as our society becomes more litigious we’re finding traditionally the million dollars that was put on the policy is often not enough. Look into this area and check and see whether you need higher limits of liability. It will depend on your lifestyle and your assets as well. Liability is an extremely important part so make sure you understand that aspect as well.